The Return of Malthusian Equilibrium

After the departure of Europeans from their colonies following the end of World War II, the Third World rapidly became tyrannical, and their economies began a long decline. The institutional collapse of the Third World has continued over all these years, except that in the past two decades, from an extremely low base, its economies have improved. This economic growth did not happen because the Third World liberalized its economies or adopted any fundamental cultural change in its societies. What enabled synchronous economic progress over the past two decades in the Third World was the internet and the emergence of China.

Cheap telephony and the internet came into existence in the late ’80s. The internet provided pipelines for the transfer of technology and enabled wage-arbitrage to be exploited. Also, many countries — particularly in Latin America and sub-Saharan Arica — benefited from the export of resources to gluttonous-for-resources China, the only emerging market I know of, and to the developed world, which contrary to propaganda is economically still by far the fastest growing part of the world.

Cherry-picking countries of subsistence farmers and cattle-herders for propaganda purposes tells you nothing about the sustainability of their growth.

It is hard to believe, but many countries in the Middle East and North Africa peaked economically in the 1970s. Their competitive advantage was oil, not human resources. The per capita real GDPs of Saudi Arabia and the UAE, despite the fact that they have had a relatively peaceful existence, are about half as large as they were in the ’70s. The situation is similar in Venezuela and to a large extent in Nigeria. Except for the personal use of cellphones, the information technology revolution has simply bypassed these and many other countries.

According to the propaganda — steeped in political correctness — of the international organizations, all the fastest growing economies are in the Third World. But simple primary school mathematics helps cut through this propaganda. Ethiopia is claimed to be among the fastest growing large economies. This is quite a lie. An 8.5% growth rate of Ethiopia on GDP per capita of US$846 translates into growth of a mere US$72 per capita per year. The US economy, with GDP per capita of US$62,152, is 73 times larger, and despite its growth at a seemingly low rate of 2.2%, it currently adds US$1,367 to its per capita GDP — 19 times more than Ethiopia. The situation looks even more unfavorable for Ethiopia if its population explosion of 2.5% per year is considered.

Cherry-picking countries of subsistence farmers and cattle-herders for propaganda purposes tells you nothing about the sustainability of their growth, and certainly does not in any way enable comparison with the developed world.

The developed world is growing much, much faster than the Third World. The only exception is China.

Over the past two decades, the low hanging fruit of economic growth has been plucked in the Third World. South Asia, Southeast Asia, West Asia, Africa, and Latin America are now starting to stagnate. As the tide of the economic growth rate recedes, institutional collapse will become more visible. It will be seen on the streets as civic strife. What is happening in Venezuela, Syria, Turkey, Nicaragua, Honduras, Pakistan, Congo, and South Africa — where institutions are collapsing, social fabric is falling apart, and tyranny is raising its ugly head — are not isolated events but part of the evolving Third World pattern. Once its institutions have been destroyed, there will be no going back. They simply cannot be rebuilt.

When one looks at the world map, one realizes that all colonized countries were created in European boardrooms.

On a simplistic organizational chart, institutions in the Third World may look the same as they looked when European colonizers departed, but without reliance on the rule of law, respect for individual rights, and a rational approach to problem solving — all foundational concepts propagated by the West. They have been swamped by tribalism, magical thinking, and arbitrary dogmas and rituals.

Without the foundation of rational, critical thinking, formal education merely burdens the mind. The result is that stress among the so-called educated people in the Third World is growing, and no wonder: formal education, unassimilated, can work only in narrow areas, where all you want is cogs that can do repetitive jobs in corner cubicles, without encouragement or reward for creativity. This is not a future-oriented environment; it is a merely pleasure-centric one, in which people become easy victims of cultural Marxism. Democratic politics devolved into the politics of anti-meritocratic mass rule, destroying any institutions of true self-government.

During my recent visit to Port Moresby in Papua New Guinea, a young Western girl working for a Western embassy told me that she once went out without her security force. The police stopped her car, and she was fortunate that her security arrived before the police could take her away. The negotiation between police and security was about how much it would take not to rape her. Rape is common in Papua New Guinea, as it is in the rest of the Third World; but because this was a girl working for the embassy, rapists would have had their bones broken the day after. But their bones would have been broken the day after, “too far in the future” to be of much concern.

Without institutions of liberty and protection of private property, financial and intellectual capital does not accumulate.

When one looks at the world map, one realizes that all colonized countries were created in European boardrooms. There was no country of South Africa, Zimbabwe, Congo, or even India before the arrival of Europeans. The people who now run these countries simply do not have the ability or impetus to manage such large societies. They have tribal mentalities, unable to process information outside the visible space. The rulers of modern tribes continuously increase the size of their bureaucracies, but this merely creates overcentralization, the ossification of institutions, and massive, though unseen, systemic risks. Of course, tribalism is irrational, and internecine rivalry a fact of existence that is experienced only on a moment-to-moment basis.

Before the arrival of the Europeans, most of sub-Saharan Africa had no written language and few tools, contrary to popular perception of a pre-colonial utopia. Warfare was the order of the day. Eating flesh and brains of an enemy killed in conflict was practiced from Papua New Guinea, to Africa, to the Americas. Cannibalism is not unknown even today. Contrary to politically correct versions of history, 19th-century colonization was a massive, sudden improvement for many colonized peoples, and a paradigm shifting event for the Third World.

Europeans of the 1940s clearly knew that if they left the Third World, entropy would rapidly ensue, the locals would fail to run their countries, and those countries would implode into tribal units. These wouldn’t be self-managed societies that libertarians dream of, but tribal ones afflicted with internecine warfare. That is indeed where the Third World is heading, and much of it has arrived.

Africa’s population is growing at a faster rate now than it was in 1950.

Without institutions of liberty and protection of private property, financial and intellectual capital does not accumulate. Indeed, the Third World actively destroys or dissipates any material benefit that accrue to it. This happens through war, overconsumption, expansion of the exploiting (ordinarily the governing) class, and the active destruction of capital that one sees in the crime, vandalism, riot, and other means of destroying property that characterize the Third World. Despite their extreme possessiveness, people who destroy the capital of other people fail to maintain their own. In many Third World cities, when there is a day of celebration it is easy to assume that it is the day when employees got their salaries — which disappear by the next morning, drunk away. Capital fails to be protected or accumulated; the rational structure of a productive, thrifty, and prudent culture is not there.

While people in the West are blamed for being materialistic, Third World people are often much more focused on their possessions. The great fleet of servants in India, who are destined to forever remain servants, may earn a mere $100 dollars or less a month, but must have the latest smartphone. For me it is impossible to comprehend how they pay their rent, buy food, and still have some money left to buy a phone; but I remind myself that actually they take loans to buy smartphones and are forever in debt.

And now — the population problem is becoming worse.

Consider Africa alone. Africa’s population in 1950 represented a mere 10% of the world population. By the end of this century Africa, the poorest continent, is predicted to have at least 40% of the world’s people. Africa’s population is growing at a faster rate now than it was in 1950. Given that this rate begins from a much higher base, Africa adds six times more people today than it did in 1950.

More important: in the Third World countries, population control has mostly happened within the relatively more educated, intellectually sophisticated part of society. In Northern India, to cite another example, the unstable, uneducated, chaotic, and backward part of the population is exploding in size. Southern India, which is relatively stable and better off, is falling in population.

With ease of mobility, segregation is picking up its pace. The economically best people of the Third World find it much easier to emigrate than to stay home and fight to make society better, or maintain it in its current state. In 2017 alone, 12% of Turkish millionaires and 16% of Venezuelan millionaires emigrated. So great has been the emigration from India that it is virtually impossible to find a decent plumber or electrician. Forget about finding a good doctor. In a survey, only 30% of Indian doctors could diagnose a simple ailment. Everywhere educated people move to cities, while the rest stay on in rural places. Segregation is real, leaving the underclass with a huge deficit in leaders.

There is also segregation by sector of the economy. As the private sector has evolved in the Third World, government institutions have increasingly become brain-dead, for the best brains now want to work for high salaries in the private sector, leaving state power in the hands of the worst brains. Naturally, people have become very stressed and unsure. As an emotional escape, superstitious rituals and religious-nationalism are increasing exponentially, contributing to the elevation of exploitive, sociopathic elements to positions of power.

Perhaps, payments made to people for having children must stop; instead people should get money not to have children.

It is possible that some parts of the Third World simply cannot be “governed.” A couple of years back I undertook what I consider the most dangerous trip of my life. I went to Goma in the Democratic Republic of Congo (DRC) on my own. Even for DRC, Goma is a lawless part. The Swedish police I was staying with told me one day that a pregnant woman had been raped, her fetus removed, cooked, and fed to other women of the tribe, who had all been raped. Listening to the stories of celebration of such brutalities in the Congo and elsewhere in Africa, I couldn’t but imagine what I would do if I were forced to run the DRC. I couldn’t imagine ever being able to bring it back to relative sanity without imposing the tyranny — for fear is the only restraint available in the absence of reason — for which Leopold II of Belgium is infamous.

This brings us to the terrible predicament of the Third World. Except for China, the countries of the Third World have failed to develop inner competencies and hence internal reasons to accumulate financial and intellectual capital. They have failed to maintain their institutions, which have continued to decay after the departure of European colonizers. The crumbs of economic benefits — the gifts of western technology — have been dissipated. What can be done? How would you deal with the predicament?

There is no hope unless the vast size of the underclass, who are statistically unable to participate economically, particularly in the age of AI, is reduced. Perhaps, payments made to people for having children must stop; instead people should get money not to have children. Even this first step can only happen if the Third World institutions are changed and rational leaders are imposed. But who will impose them?

The end result is obvious. With time — slowly and then rapidly — the Third World will continue to fall apart institutionally. The Third World will implode. This two-thirds of the world population will fall into tribes that, being irrational, will have no way to resolve disputes. They will enter a phase of neverending warfare, with other tribes and within their own tribes. If there is any surplus left, it will be dissipated through population growth and overconsumption. Ahead there is only entropy and a Malthusian future, mimicking the sad Malthusian equilibrium that existed before the colonizers came.

About this AuthorJayant Bhandari is constantly traveling the world to understand it and to look for investment opportunities, particularly in the natural resource sector. He advises institutional investors about his finds. He also runs a yearly seminar in Vancouver entitled "Capitalism & Morality."